Over and above the ownership element, which has been much talked about and received a lot of press in the past, there are additional elements to comply with under the Generic B-BBEE scorecard. The intent of the elements as contained in the B-BBEE Codes of Good Practice is to assess B-BBEE compliance on different levels within the measured entity. The scores under each element are then calculated and added up to provide for a percentage score which equates to a certain B-BBEE contributor status.
As this is a time of the year where numerous businesses are considering and implementing initiatives aimed at B-BBEE compliance with upcoming verifications, a quick summary of the all the elements as contained in the B-BBEE Codes of Good Practice and some practical verification guidelines applicable to certain of the elements are herewith provided.
General
It is important to note that any B-BBEE verification, or audit, is based on a specific financial year and initiatives should be implemented within this period for the most part. Verification guidelines further stipulate that no measured entity may report and get verified on any financial period of 12 months not corresponding with its latest completed financial year.
During a verification, contributions under all elements during a specific financial year are measured, except for the ownership and management control elements which are measured as on date of verification (This date falls outside of the financial year).
Ownership
The Ownership element measures voting rights and economic interest in the hands of black people and black women, as well as in the hands of certain groups such as employee ownership and empowerment schemes. Points also get awarded for the degree to which black participants are released from all encumbrances with regards to ownership interest, e.g. loans that need to be repaid. Bonus points are awarded for the involvement of black women as well as employee ownership schemes and empowerment schemes. Ownership is also one of the three priority elements. In short, a priority element entails that if a sub-minimum of 40% is not achieved under such element, a generic company will lose one B-BBEE level on its overall scorecard.
Management Control
The Management element measures the voting rights of black directors and black executive directors as well as the percentage black employees (as a percentage of the total employees in a specific category) in management positions employed on the date of verification. Here, most of the recognition is received for black representation on board and senior levels of employment. During the verification process, black and white employees claimed in the same categories are also compared from a remuneration perspective.
Skills Development
The Skills Development element, measures the amount spent of training expenditure on black employees as well as on all black unemployed persons as a percentage of the ‘Leviable amount’ (the amount as defined in the ‘Skills Development Levies Act’ of 1999, as set out by the Fourth Schedule to the Income Tax Act) that is to say the annual payroll of the entity. Further points are awarded for bursaries for black students at higher education institutions. The last sub-section of the Skills Development element measures the total number of black people that are registered for learnerships, internships and apprenticeships as a percentage of all the employees of the measured entity. An entity will receive recognition for training done for employees and non-employees under this element. The Skills Development Element is also a priority element.
Enterprise and Supplier Development
This element has three sub-elements.
Firstly, the Preferential Procurement element measures the purchases from different categories of B-BEE suppliers as a percentage of the total purchases. A heavy emphasis is placed on purchasing from suppliers that are at least 51% black owned.
The Enterprise Development element measures the annual value of the monetary and non- monetary contributions made to qualifying enterprise development beneficiaries and beneficiary entities. The target for contributions are linked to a specified percentage of the entity’s net profit after tax for the specific financial year reported under (or in the absence of a profit, a target based on an industry norm expressed as percentage of turnover)
Supplier Development is similar to the Enterprise Development element, with the main difference being that recognised contributions must be made to suppliers of a measured entity.
Enterprise and Supplier Development is the last of the three priority elements.
Socio-Economic Development
The Socio-Economic Development element measures monetary and non- monetary contributions to individuals or communities or groups of beneficiaries, where at least 75% of the beneficiaries are classified as black people. Contributions under this element are very similar to those typically made as part of the entity’s corporate social responsibility initiatives.
Examples of contributions include donations and grants, offering discounts or covering overheads or direct costs of qualifying beneficiary organisations.
This is a very broad overview of what is required in order to comply and the criteria under some of the elements do get very detailed and complicated.
It is suggested that a B-BBEE professional be involved in the planning and implementation process to ensure that your business is sufficiently prepared for upcoming verifications.